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Study Guide- Life Insurance Proceeds

The study guide is provided to guide you through the course material in a step by step format.

Course material is a PDF document.

Chapter 1 – Life Insurance Death Benefits

Assignment: Chapter 1 <<>> Review Questions Chapter #1: # 1-6

When you have completed this course, you should be able to:

  • Calculate the gain to be recognized as a result of various life insurance policy transactions, including –
    • withdrawals,
    • loans,
    • surrenders, and
    • payment of death benefits;
  • Identify the changes to the customary tax treatment of life insurance policy living proceeds resulting from the policy being deemed a modified endowment contract (MEC);
  • Calculate the reportable gain upon receipt of life insurance policy death benefits when the life insurance policy –
    • has been transferred for a valuable consideration, or
    • was included in a qualified plan;
  • Recognize the types of life insurance exchanges that are tax-free under IRC §1035;
  • Define the terms “terminally-ill” and “chronically-ill” as used in the Health Insurance Portability and Accountability Act; and
  • Identify the income tax treatment of accelerated death benefits, viatical settlements and life settlements.

Chapter 2 – Life Insurance Policy Living Proceeds

Assignment: Chapter 2 <<>> Review Questions Chapter #2: #1-6

When you have completed this chapter, you should be able to:

  • Recognize the customary income tax treatment given to life insurance policy withdrawals, loans and surrender proceeds;
  • Identify the changes to the tax treatment of life insurance policy living proceeds resulting from the policy being deemed a modified endowment contract;
  • Identify the types of life insurance exchanges that are tax-free under IRC §1035; and
  • Recognize the income tax treatment of life settlements.

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